Credit squeeze set to intensify

The prospect of an interest rate cut next week grew sharply after the Bank of England said yesterday that the squeeze on mortgages and corporate credit was set to intensify. Financial Times.

The Bank’s quarterly credit conditions survey showed financial institutions had cut lending to households and companies and expected to clamp down even harder in coming months.

With the closely watched Chartered Institute of Purchasing and Supply index of service sector activity sliding to a four-month low, the Bank is widely expected to cut rates from 5.25% to 5% next Thursday.

In a Reuters poll yesterday, 48 out of 63 economists said the Monetary Policy Committee would ease policy in April rather than May.